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I theoretically thought it was like that, but the example given in the book’s answer completely confused me. But I understood it, thank you
Thank you very much for your explanation, I got it and not yet Sir but I will watch
Thank you sooo much Sir,
No I haven’t watched them yet, but I will watch as soon as
here their answers
412)
(W1) 6% convertible loan notes
The convertible loan notes are a compound financial instrument having a debt
and an equity component which must both be quantified and accounted for
separately:
Year ended 31 March Outflow 8%
factor
Present
value
$000 $000
20X6 Interest – $4m × 6% —2,400 0.93 2,232
20X7 Interest ——————2,400 0.86 2,064
20X8 Capital + interest —–42,400 0.79 33,496
–––––––
Debt component 37,792
Equity component (= balance) 2,208
–––––––
Proceeds of issue 40,000
–––––––
The finance cost will be $3,023,000 (37,792 × 8%) and the carrying amount of
the loan notes at 31 March 20X6 will be $38,415,000 (37,792 + 3,023 – 2,400).413)
Working 1 – Convertible loan notes
Payment Discount
factor
Present value
$000 $000 $000
20X7 320 0.943 302
20X8 320 0.890 285
20X9 8,320 0.840 6,989
––––––
7,576
––––––
As the full amount of $8m has been taken to liabilities, adjustment required is:
Dr Liability $424,000
Cr Equity $424,000
The liability is then carried at amortised cost, using the effective interest rate.
Balance Interest Payment Balance b/f 6% c/f
$000 $000 $000 $000
7,576 455 (320) 7,711As only $320k has been recorded in finance costs:
Dr Finance costs $135k
Cr Liability $135ki understand your point but in other questions we don’t do like this. for example
PANDAR
On 1 April 20X9 Pandar purchased 80% of the equity shares in Salva. On the same date Pandar
acquired 40% of the 40 million equity shares in Ambra paying $2 per share.
The statement of profit or loss for the year ended 30 September 20X9 are:(1)
The fair values of the net assets of Salva at the date of acquisition were equal to their
carrying amounts with the exception of an item of plant which had a carrying amount
of $12 million and a fair value of $17 million. This plant had a remaining life of five
years (straight?line depreciation) at the date of acquisition of Salva. All depreciation is
charged to cost of sales.
The fair value of the plant has not been reflected in Salva’s financial statements.
No fair value adjustments were required on the acquisition of the investment in
Ambra.and calculation in the book:
w1 Cost of sales $000Pandar 126,000
Salva (100,000 × 6/12) 50,000
Intra?group purchases (15,000)
>Additional depreciation: plant (5,000/5 years × 6/12) 500<
Unrealised profit in inventories (15,000/3 × 20%) 1,000
Unrealised profit (Ambra) (6,000 × 20% × ½ × 40%) 240
–––––––———————————————162,740w4 Non?controlling interest
Salva’s post?acquisition profit (see tutorial note above) 9,500
>Fair value depreciation (W1) (500)<
Impairment (W1) (2,000)
–––––
7,000
–––––
Non?controlling interest share at 20% 1,400Just look at the deprecation amount of fair value which in here added to cogs deducted from nci. question is same like above but method is different, i think
propably it has some logic, but i did not get it, if you clarify for me I will be grateful
for Leasehold property they do like this:
W4
Valuation/cost 1 April 20X8: ————–25,200
Depreciation charge :$25,200 × 1/12— (1,800)
————————————————-23,400
Revaluation surplus————————1,500
Revaluation/carrying ———————–24,900
amount 31 March 20X9okay, I took B variant. The full sales value was $700,000 and $200,000 has not included this year. Then isn’t it 500 our revenue? (700-200)